According to new data put out by the Bureau of Economic Analysis (BEA) on Friday, the personal consumption expenditures (PCE) index increased 6.8% in June, the highest yearly increase since January 1982. The month-to-month change in PCE was also the highest since February 1981, when the PCE also jumped 1% from the previous month.
The PCE index also found core inflation (removing food and energy prices) up 4.8% yearly, which was higher than the previous month’s increase. The numbers exceeded Dow Jones estimates for inflationary increases.
The new inflation numbers also come as the U.S. officially entered a recession on Thursday, as gross domestic product decreased for a second consecutive quarter.
The BEA’s first estimate of the nation’s gross domestic product was worse than the predicted expansion of 0.5%, shrinking at an annualized rate of 0.9%. Economists widely define a recession as two consecutive quarters of negative growth.
“The decrease in real GDP reflected decreases in private inventory investment, residential fixed investment, federal government spending, state and local government spending, and nonresidential fixed investment that were partly offset by increases in exports and personal consumption expenditures (PCE),” the BEA explained. “Imports, which are a subtraction in the calculation of GDP, increased.”
Despite the poor economic news, President Biden has maintained that the U.S. economy is in good shape and “on the right path.”
“Coming off of last year’s historic economic growth – and regaining all the private sector jobs lost during the pandemic crisis – it’s no surprise that the economy is slowing down as the Federal Reserve acts to bring down inflation,” Biden said in a statement.
“But even as we face historic global challenges, we are on the right path and we will come through this transition stronger and more secure,” the president added. “Our job market remains historically strong, with unemployment at 3.6% and more than 1 million jobs created in the second quarter alone.”
Biden also pushed two pieces of legislation, the CHIPS Act and the Inflation Reduction Act, that would spend billions of more dollars.
The two plans combined would cost taxpayers roughly $920 billion. CHIPS would cost nearly $250 billion and the Inflation Reduction Act would spend $670 billion total while raising certain taxes. Experts have also surmised that Biden’s $1.9 trillion “American Rescue” spending plan contributed to the current record-high inflation mentioned by the president.
Tim Meads contributed to this report.